DuPontDisQues
Discussion Questions for Du Pont
Du Pont:
1. What is Du Pont’s competitive position in the titanium dioxide industry in 1972? Are Du Pont’s competitive advantages sustainable?
2. What are the characteristics of the industry?
3. As chairman of Du Pont’s Executive Committee, would you vote in favor of preemption?
Assuming a constant elasticity demand curve as follows:
Q
Based on the data provided in the case, we may derive the following cost function:
4. If you adopt a preempt strategy what prices do you think that Du Pont should charge, in light of competitors costs? What is your strategic objective when you adopt the preempt strategy? Growth strategy?
5. If you adopt a maintain strategy, what prices should Du Pont charge?
6. Under such prices, what are demand and cost for Du Pont?
7. Examining Exhibit 7 carefully, what are the assumptions behind the pricing and market share estimates? Do you trust managers’ estimates on prices over time? Are your pricing under both strategies the same as prices shown in Exhibit 7?
8. Given the investment cost is $1,000/ton, what will Du Pont’s cashflows be under these two strategies under your price assumptions? You may use NPV to calculate the present value of the two strategies. If you do not know NPV, just add the cashflow up till 1985. Keep in mind that you need make assumptions about the residual value of the plant.
9. Will competitors follow Du Pont’s strategy? Why and why not? What would their reactions to Du Pont’s growth or maintain strategy?
10. What are the risks of the two strategies?
11. What do you recommend?
Du Pont:
1. What is Du Pont’s competitive position in the titanium dioxide industry in 1972? Are Du Pont’s competitive advantages sustainable?
2. What are the characteristics of the industry?
3. As chairman of Du Pont’s Executive Committee, would you vote in favor of preemption?
Assuming a constant elasticity demand curve as follows:
Q
Based on the data provided in the case, we may derive the following cost function:
4. If you adopt a preempt strategy what prices do you think that Du Pont should charge, in light of competitors costs? What is your strategic objective when you adopt the preempt strategy? Growth strategy?
5. If you adopt a maintain strategy, what prices should Du Pont charge?
6. Under such prices, what are demand and cost for Du Pont?
7. Examining Exhibit 7 carefully, what are the assumptions behind the pricing and market share estimates? Do you trust managers’ estimates on prices over time? Are your pricing under both strategies the same as prices shown in Exhibit 7?
8. Given the investment cost is $1,000/ton, what will Du Pont’s cashflows be under these two strategies under your price assumptions? You may use NPV to calculate the present value of the two strategies. If you do not know NPV, just add the cashflow up till 1985. Keep in mind that you need make assumptions about the residual value of the plant.
9. Will competitors follow Du Pont’s strategy? Why and why not? What would their reactions to Du Pont’s growth or maintain strategy?
10. What are the risks of the two strategies?
11. What do you recommend?